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Cost-Shifting 2.0: Employees Likely to Contribute More

Rising costs might force employees to pay a larger share

#Stephen Miller, CEBS

By Stephen Miller, CEBSApr 25, 2011

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In response to higher expected costs, U.S employers appear poised to implement more employee health care and other benefit plan cost sharing, according to the 17th annual Top 5 Total Rewards Priorities survey conducted by the International Society of Certified Employee Benefit Specialists (ISCEBS) and Deloitte Consulting LLP.

The survey was conducted in January 2011 among HR and benefits professionals from a diverse cross-section of U.S.-based organizations. Survey participants were asked to respond as representatives of their employers, with the exception of two questions asking about their personal challenges and plans as employees.

While a large number of employers expect an increase in the cost of providing benefits to employees, two-thirds of them are making no immediate changes to their benefits programs as they await health care reform regulations that might reduce plan design flexibility.

“Though the economy is rebounding, there are ominous signs that employees may soon need to start contributing more of their paycheck to total rewards programs,” said David Lusk, a principal at Deloitte. At the same time, “With concern for their ability to afford retirement, many employees are increasing their contributions to retirement savings plans, while employers are seeking more opportunities to share health care costs with them. This results in competing objectives.”

For 2011, employers ranked their top five priorities regarding total rewards (defined as compensation, benefits, perquisites and any other direct or indirect payments to employees) as follows:

1. The cost of providing health care benefits to employees.

2. The willingness of employees to pay an increasing portion of benefits plan coverage.

3. The ability of reward programs to attract, motivate and retain talent.

4. The ability to adjust to and comply with current and future provisions of health care reform legislation.

5. Clear alignment of total rewards strategy with business strategy and brand.

“Challenges associated with attracting, motivating and retaining talent remain a concern for organizations rebounding from the recession,” said ISCEBS President Steven Grieb. “A clear priority for businesses today is their understanding, preparation and management of costs and provisions associated with health care reform legislation.”